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The doubtful collectibility of the $600,000 in dispute is
established by the contingent nature of petitioner's right to
receive any further payments and by Clinch River's serious
financial condition and history of delinquent payments under the
various contracts.
These factors taken together constitute and are to be
regarded as more than mere obstacles postponing payment and
receipt of the $600,000 in dispute. The combination of the
contingent nature of the payments that were due and the severe
financial condition of Clinch River created serious and
reasonable doubt as to whether petitioner would ever collect any
portion of the $600,000 in dispute and justify, in this case,
nonaccrual of this $600,000 in petitioner's 1989 taxable year.
The fact that petitioner, in subsequent years, sued Clinch
River for recovery of the full balance due under the original
October 1987 contract does not alter our conclusion herein. Such
legal action, in this case, must be regarded as merely protective
and perfunctory. It did not alter or eliminate the price
reductions that had occurred and that respondent recognizes
herein, and it did not alter or eliminate the unlikelihood that
petitioner would receive any additional payment from Clinch
River.
Because we hold for petitioner as to nonaccrual of the
$600,000 in dispute, we need not address petitioner's alternative
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